CERN Discovers New Particle Called The FERIR

CERN has just announced the discovery of a new particle, called the “FERIR”.

This is not a fundamental particle of matter like the Higgs Boson, but an invention of economists. CERN in this instance stands not for the famous particle accelerator straddling the French and Swiss borders, but for an economic research lab at MIT—whose initials are coincidentally the same as those of its far more famous cousin.

Despite its relative anonymity, MIT’s CERN is far more important than its physical namesake. The latter merely informs us about the fundamental nature of the universe. MIT’s CERN, on the other hand, shapes our lives today, because the discoveries it makes dramatically affect economic policy.

CERN, which in this case stands for “Crazy Economic Rationalizations for aNomalies”, has discovered many important sub-economic particles in the past, with its most famous discovery to date being the NAIRU, or “Non-Accelerating Inflation Rate of Unemployment”. Today’s newly discovered particle, the FERIR, or “Full Employment Real Interest Rate”, is the anti-particle of the NAIRU.

Its existence was first mooted some 30 months ago by Professor Larry Summers at the 2013 IMF Research Conference. The existence of the FERIR was confirmed just this week by CERN’s particle equilibrator, the DSGEin.

Asked why the discovery had occurred now, Professor Krugman explained that ever since the GFC (“Global Financial Crisis”), economists had been attempting to understand not only how the GFC happened, but also why its aftermath has been what Professor Summers characterized as “Secular Stagnation”.

Their attempts to understand the GFC continued to fail, until Professor Summers suggested that perhaps the GFC had destroyed the NAIRU, leaving the ZLB (“Zero Lower Bound”) in its place.

This could have happened only if there was a mysterious second particle, which was generated when a NAIRU equilibrated with a GFC. Rather than remaining in equilibrium, as sub-economic particles do in DSGEin, NAIRU apparently vanished instantly when the GFC appeared. Something else must have taken its place. DSGEin was unable to help here, since it rapidly returned to equilibrium—while the real world that it was supposed to simulate clearly had not.

CERN’s attempts to model this phenomenon in DSGEin were frustrated by the fact that a GFC does not exist inside a DSGEin—in fact, the construction of the DSGEin was predicated on non-existence of GFCs.

The ever-practical Professor Krugman recently suggested a way to overcome this problem. Why not turn to the real world, where GFCs and its generic particle family, GDs (“Great Depressions”), exist in abundance, and feed one of those into the DSGEin?

Unfortunately, the experiment destroyed the DSGEin, since the very existence of a GFC within it put it through an existential crisis. However, before it broke down (while mysteriously singing the first verse of “Daisy, Daisy, give me your answer do”), the value for the NAIRU in DSGEin suddenly turned negative.

This led Professor Summers to the conjecture that perhaps there was a negative anti-particle to the NAIRU, which he dubbed the FERIR.

Lacking a functional DSGEin at the time, Summers fed a GFC into the older SLIM equilibrator lovingly maintained by Professor Krugman—and he discovered that the NAIRU took on a negative value there. Since the NAIRU cannot be negative, Professor Summers realised that he had discovered a new particle—the FERIR. When the FERIR interacted with a ZLB, the outcome was Secular Stagnation.

Professor Summers—who expects to receive the Nobel Prize for his discovery—had some harsh words for critics who had rubbished the very attempt to explain the GFC using a sub-economic particle equilibrator.

“They accuse us of adding ‘epicycles’ to our models to make them fit the data. That’s nonsense: that’s so 15th century. We’re way beyond that now,” sneered Professor Summers at length. “These days, we add new fundamental particles to our sub-economic menagerie: that’s way more sophisticated.”

The FERIR may now help economists understand the persistence of the ZLB, which has confounded all predictions to date. Having expected the ZLB to evaporate and be replaced fairly rapidly by an NRI (“Natural Rate of Interest”), economists have been flummoxed by its persistence—eight years now and counting.

“We have shown that the FERIR equilibrates with and maintains the ZLB,” Professor Krugman explained. “So Larry’s discovery is really, really important”.

Now that economists have explained the persistence of the ZLB, they can now turn their attention to understanding its perverse effects. The real problem of the ZLB for economists has been that it inverts the status and behaviour of all other sub-economic particles. In particular:

Growth, which was high, is now low;

Inflation, which was bad & everywhere, is now good & nowhere;

CBs (“Central Banks”) which prevent inflation, now try to cause it; and

HMDs (“Helicopter Money Drops”) which were mad, are now sane

These inversions are causing real problems for economists, who find themselves arguing for policies they used to oppose. Professor Summers hopes that knowledge of the existence of the FERIR will make it easier for economists to argue that night is day and rainbows are grey, as they provide policy advice in these troubled times.

POSTSCRIPT: Written with the inspiration of Axel Leijonhufvud’s brilliant parody “Life Among the Econ” firmly in mind.

POST-POSTSCRIPT: The NAIRU—the “Non-Accelerating Inflation Rate of Unemployment”—was a fiction of Milton Friedman’s imagination, and countless hours were wasted by economists trying to calculate it. I fully expect a new generation of economists to waste their time trying to calculate the FERIR as well.

POST-POST-POSTSCRIPT: The serious intent to this parody is the observation that the approach to economics that failed to anticipate the GFC—and that even believed such events were impossible—is unlikely to be able to advise what to do in the aftermath to the GFC. We need a new theory, not merely a new fictional acronym in the fantasy universe of mainstream economics.

POST-POST-POST-POSTSCRIPT: This post was originally on Forbes, where it had reached almost 20,000 reads after about 12 hours. Then Forbes took it down because:

As a general rule we don’t allow contributors to post parody pieces on the site, because being posted under the Forbes banner results more often than not, in confusion. It’s uncommon that the argument for posting such a piece rises to the level of overcoming the concerns that arise.

In this case, we have a number of contributors and staffers on the science beat who cover the real CERN and we don’t want to be in a position where our readers can’t trust if their headlines are about real discoveries/events.

Personally I would prefer if they’d simply edited the headline to include the word Parody. So I’m posting this one here until I decide where else to place it.

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Almost every recent undergraduate text book on economics contains cynical cartoons of the kind that create a sarcastic attitude in the mind of the student to our vital and most significant subject. Even if our science was as dismal as some may claim, there is no need for this attitude to prevail here on RWER, where it is equally damaging. I sincerely hope that the readers of this article can balance properly the aspects of its peculiar poor sense of humor against what might be achieved when a more formal and serious attitude prevails without any more cynicism! (The writer is President of the Hate the FERIR Society.)

Utterly fantastic – well done Steve Keen, the Last Real Economist Standing! And, rendered all the more delicious by the Forbes admission that ‘real’ economists and students can’t tell the difference between reality and parody!

It is one of the ongoing tragedies of our age that people of vision and wisdom like Steve are the Cassandras-de-nos-jours; the more sense they talk, the less the corrupt system of highly politicized economics and so-called ‘economists’ listen to them.. a noble prize for Summers my arse!

Please, Steve Keen, post here Anytime before you ” decide where else to place it.”
As Edward Fullbrook stated, “…because it suggests that the work of the RWER community of scholars has had and is having more influence in the wider world than we realize. In assessing our success we tend to focus on curriculums and academic appointments, where heresy checks remain as tightly and ruthlessly enforced as ever. But perhaps out there in the real world the credibility of Econ 101 is quietly declining as opinion-shapers begin to read and listen more widely.”(The Rana Foroohar Phenomenon)
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